China's inflation falls to 30-month low in July

Zeebiz Bureau

Beijing: China's inflation rate fell further to a 30-month low in July, giving the government more scope to stimulate growth to keep economy on track to meet 2012 growth target of 7.5 percent.

The consumer price index rose 1.8 percent, down from the previous month's 2.2 percent and well below last year's highs, data showed Thursday.

Industrial output and fixed-asset investment data, due for release later on Thursday, were expected to show signs of a pick-up in activity, indicating that the economy is starting to stabilise after sliding for six straight quarters.

Still, any economic improvement will be fragile as the eurozone debt crisis and a sluggish US recovery keep global growth at a low ebb, the main factor that pushed China's new export orders in July into their steepest fall in eight months.

The central bank said in a report last week consumer inflation might rebound after August due to seasonal factors and the rising cost of labour and resources.

Still, there is little sign of inflationary pressures coming from factories. July's data showed that producer prices fell in July by 2.9 percent from a year earlier, a sharper decline than the 2.5 percent forecast and the steepest fall since October 2009.

It marked a fifth straight month of falling producer prices, reflecting the pressures eating into corporate earnings and capping capital spending.

China's industrial output growth is forecast to pick up to a four-month high of 9.8 percent year-on-year in July from 9.5 percent in June, a Reuters poll showed.

Annual growth in fixed-asset investment, in the likes of real estate, roads and bridges, is seen nudging up in January-to-July to 20.5 percent from January-to-June's 20.4 percent, as the government seeks to spur infrastructure investment.

Growth of retail sales, the biggest driver of the economy's expansion in the first quarter, is seen steady though at 13.7 percent.

Economic growth has been sliding since the beginning of 2011, reaching 7.6 percent in the second quarter, the weakest pace since the global financial crisis.

With Agency Inputs